Tax Information -
Issue Number: Special Edition Tax Tip 2009-09, September 14, 2009
Nine Facts about the New Vehicle Sales and Excise Tax Deduction
Taxpayers who buy new motor vehicles this year may be entitled to a special tax deduction for the sales or excise taxes on those purchases when they file their 2009 federal tax returns next year. This tax break is part of the American Recovery and Reinvestment Act of 2009.
Taxpayers in states that do not have state sales taxes may be entitled to deduct other fees or taxes imposed by the state or local government.
Here are nine important facts the IRS wants you to know about the deduction.
- State and local sales and excise taxes paid on up to $49,500 of the purchase price of each qualifying vehicle are deductible.
- Qualified motor vehicles generally include new cars, light trucks, motor homes and motorcycles.
- To qualify for the deduction, the new cars, light trucks and motorcycles must weigh 8,500 pounds or less. Motor homes are not subject to the weight limit.
- Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010.
- Taxpayers who purchase new motor vehicles in states that do not have state sales taxes may be entitled to deduct other fees or taxes assessed on the purchase of those vehicles. Fees or taxes that qualify must be based on the vehicles’ sales price or as a per unit fee. These states include Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon.
- Taxpayers who purchase qualified motor vehicles may claim the deduction when they file their 2009 tax return in 2010.
- The deduction may not be taken on 2008 tax returns.
- This deduction can be taken regardless of whether the buyers itemize their deductions or choose the standard deduction.Taxpayers who do not itemize will add this additional amount to the standard deduction on their 2009 tax return.
- The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.
For more information on this and other key tax provisions of the Recovery Act visit the official IRS Website at www.IRS.gov.
Links:
IR-2008-117, Oct. 16, 2008
WASHINGTON — For 2009, personal exemptions and standard deductions will rise and tax brackets will widen because of inflation adjustments announced today by the Internal Revenue Service.
By law, the dollar amounts for a variety of tax provisions must be revised each year to keep pace with inflation. As a result, more than three dozen tax benefits, affecting virtually every taxpayer, are being adjusted for 2009. Key changes affecting 2009 returns, filed by most taxpayers in early 2010, include the following:
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The value of each personal and dependency exemption, available to most taxpayers, is $3,650, up $150 from 2008.
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The new standard deduction is $11,400 for married couples filing a joint return (up $500), $5,700 for singles and married individuals filing separately (up $250) and $8,350 for heads of household (up $350). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
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Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $67,900, up from $65,100 in 2008.
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The maximum earned income tax credit for low and moderate income workers and working families with two or more children is $5,028, up from $4,824. The income limit for the credit for joint return filers with two or more children is $43,415, up from $41,646.
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The annual gift exclusion rises to $13,000, up from $12,000 in 2008.
Information about the pension and retirement plan-related changes can be found in
IR-2008-118. Other inflation adjustments are described in Revenue Procedure 2008-66.
IRS Tax Tip Issue Number: TT-2007-55
DEDUCTING COSTS OF REFINANCING YOUR HOME Taxpayers who refinanced their homes may be eligible to deduct some costs associated with their loans. The term "points" is used to describe certain charges paid to obtain a home mortgage. Here are some things to remember when deducting points: Generally, for taxpayers who itemize, the points paid to obtain a home mortgage may be deductible as mortgage interest Depending on circumstances, points can be fully deductible in the year paid Points paid solely to refinance a home mortgage usually must be deducted over the life of the loan For a refinanced mortgage, the interest deduction for points is determined by dividing the points paid by the number of payments to be made over the life of the loan. This information is usually available from lenders. Taxpayers may deduct points only for those payments made in the tax year. However, if part of the refinanced mortgage money was used to finance improvements to the home and if the taxpayer meets certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid. Also, if a homeowner is refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible at pay off. Other closing costs – such as appraisal fees and other non-interest fees – generally are not deductible. Additionally, the amount of Adjusted Gross Income can affect the amount of deductions that can be taken.
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